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No. of Recommendations: 2
This company has had excellent historical growth. Over the last 5 years it has increased revenues at 17.5%/yr, earnings at 31.5%/yr and cash flow at 28%/yr. Balance sheet looks solid with no long term debt. Analysts are projecting only about 11% increase in earnings for next year. But if the recession ends and growth gets back anything close to historic the current valuation looks good. P/CF is higher than I would normally like to pay.

Some comments on PETS from The

Pompano Beach, Florida-based PetMed Express(PETS Quote) markets prescription and nonprescription medications and health products for dogs, cats and horses. The company was founded in 1996 and immediately caused controversy by undercutting vets and helping to diagnose animals. A series of lawsuits and investigations ensued. Pet Meds, as the company is known, settled for a small sum, reformed its business model and resumed growth.

Today, Pet Meds is thriving. The company just concluded a record fiscal year, capping 12 consecutive quarters of earnings growth. Revenue for the quarter that ended on March 31 rose 19% to $48 million as net income increased 15% to $5.65 million and earnings per share climbed 25% to 25 cents. The sales turnover ratio, a measure of sales relative to current assets, improved to 2.68.

In addition, PetMed Express has a superlative financial position. The balance sheet holds zero debt and over $30 million of cash and cash equivalents. A quick ratio of 4.72 indicates the firm is sufficiently capitalized to withstand a significant decline in business. Ratings considers a quick ratio of 1 to be adequate for most companies.

Despite the aforementioned positives, Pet Meds' stock has taken a beating in 2009, having declined 18% and underperformed the Dow Jones Industrial Average and S&P 500. The company's robust business model is a sign that an upward correction is imminent. Its stock currently trades at price-to-earnings ratio of 15, indicating parity with the S&P 500. But looking at peer valuation in the Internet retail industry, PetMed Express is a screaming bargain. It's 70% cheaper than its average rival on the basis of earnings.

In my view many pet owners are still paying for meds, some even considering pets to be like family members. True there have been some cases of pet abandonment in areas with foreclosed homes.

I took a small position recently in PETS in the 14-15 range. First time for me in this stock. Would appreciate any thoughts on PETS. Looks like the type of company TMFKitKat might be interested in.

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